Jack C. Bogle

Jack C. Bogle

The man who brought index funds to the world. The idea is simple:

1) Investing costs (management fees or trading fees) reduces returns over the long run. A low cost index fund enables minimal costs incurred and hence maximises the chance of tracking market returns.

2) Diversification reduces portfolio risk.

3) Most funds and retail investors don’t beat the market in the long run (they might in the short run), the surer way (higher probability of success) of making money is to invest in a low cost index fund.

How to earn money by buying an index fund?

1) A long time frame is required, the idea is that given enough time (no matter great depression, financial bubbles and recession or even world wars), the market will always grow and push to a new peak. Of course one can argue the past is not necessarily true in the future, until proven wrong we should stay the course.

2) Try to put in money on a regular basis or dollar cost average, so in general prices are high you get lesser units and when prices are low you get more units, hence averaging the costs per unit.